Trade tiff with the US: India’s retaliatory tariffs to take effect on August 4

By: | Published: June 22, 2018 3:44 AM

India on Thursday notified that its retaliatory tariffs worth close to $235 million against 29 US products will come into effect from August 4.

India’s retaliatory tariffs to take effect on August 4

India on Thursday notified that its retaliatory tariffs worth close to $235 million against 29 US products will come into effect from August 4. However, it has kept out Harley-Davidson bikes for now from the list of 30 items it had submitted with the World Trade Organisation (WTO) last week to counter the Trump administration’s move to unilaterally hike duties on Indian steel and aluminium exports. While the retaliatory tariffs could have come into effect immediately, India seems to have given some more time to the US, given an upcoming meeting. Also, the fact that the government has excluded Harley from the purview of retaliation for now (“high” Indian tariff on Harley bikes has been a sore point with US President Donald Trump) suggests New Delhi is still keeping its doors open for meaningful engagement.

Assistant US trade representative Mark Linscott will visit India to huddle with senior commerce ministry officials on June 26 and begin talks on all contentious issues. On Wednesday, the European Commission notified that it will start imposing a 25% import duty on a range of US products from Friday, in response to US tariffs imposed on EU steel and aluminium earlier this month. China, too, said the US is swinging a “big stick” of unfair trade tactics and its methods would harm its own business interests as well as those of trading partners. In response, the US alleged China was not only disrupting the global steel market but also causing both direct and indirect damage to the US.

India had asked the US to exempt it from the additional tariff of 25% on steel and 10% on aluminium imposed by the Trump administration on select countries, including India, on grounds of national security. However, the US rejected the request. Subsequently, India raised a complaint against the US duty at the WTO, seeking retaliation claim to recoup a cost of $241 million levied on its steel and aluminium exports.
Last week, India had notified the WTO the revised list of 30 American items, including almonds, apples, phosphoric acid and motorcycles with engine capacity more than 800 cc (including Harley-Davidsons), on which it intended to impose retaliatory tariffs. Earlier, on May 18, India had given the WTO a list of 20 items imported from the US worth $166 million on which it was proposing to hike tariffs. However, in the revised list, India brought down the proposed maximum additional duties from 100% (on walnuts) to 50% (on Harley-Davidson motorcycles).

Trump has often raised the issue of higher tariffs on Harley-Davidson motorcycles imposed by India and has threatened to put reciprocal taxes on Indian bikes, which he has wrongly claimed to be selling “in thousands” in the US. Addressing the press on the sidelines of the G7 summit in Canada’s Quebec City last week, Trump specifically named India, accusing it of charging 100% tariff on some US goods. “We’re like the piggy bank that everybody is robbing,” Trump said.

Ajay Sahai, director general of the Federation Of Indian Export Organisations, said India can’t be a mute spectator if the US decides to unilaterally raise duties on our products. “The response has to be a calibrated one. For retaliation, we must focus on US products that are politically sensitive for the Trump administration, as is being done by China or Canada. India has been trying to engage the US because it’s one of our most important trade partners. India has, on occasion, sought to address US concerns as well. But still, if an amicable resolution isn’t reached, there is no other way out apart from retaliating under the multilateral (WTO) arrangement,” he said.

Addressing American concerns about its massive trade deficit, India has said it is one of few countries with which the US’ trade deficit has decreased in the last one year. Also, India’s rapid economic growth will create significant new markets opportunities for the US in the coming years. India’s goods trade surplus with the US dropped almost 6% to $22.9 billion in 2017 from the previous year. While China alone accounted for a massive $375 billion, or 46%, of the US goods trade deficit of $810 billion in 2017, India made up for just 2.8%.

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